Healthy Competition

Blackmores

Blackmores is a market leader in the retail sector, 80 years old and well respected, and its latest venture – taking nutritional supplement provider BioCeuticals on board – represents the company’s largest acquisition thus far…

This idea for this feature began with FIT BioCeuticals, which markets a range of nutritional supplements to integrative medicine practitioners, natural health professionals, pharmacists and health food stores primarily in Australia and New Zealand. However, BioCeuticals was acquired in July by an even bigger name in the chemist’s shop: Blackmores, who purchased 100 per cent of the issued share capital of BioCeuticals.

In light of such a development, we sought the views of Blackmores’ Chief Executive Christine Holgate, who explained some of the reasons for the acquisition and the company’s positioning in the separate markets of consumer and practitioner medicine. Her company is a market leader in the retail sector, 80 years old and well respected, and this venture is a bit of a departure from the norm as far as the company’s practice is concerned – its largest acquisition by far. “Essentially we are a company that grows organically and we have expanded quite well by doing that,” explains Ms Holgate.

BioCeuticals’ main brands are BioCeuticals and Isowhey, with a number of smaller brands including a biotechnology and research arm. BioCeuticals has become a brand of choice for many leading clinical researchers, clinicians and colleges (and will continue to be marketed as a standalone range) while Isowhey is a weight management range available in pharmacies and health food stores. Blackmores itself is a leading brand of natural vitamins and supplements, marketed not only in Australasia but throughout Asia, including Malaysia and Thailand. It is one of the largest brands of its kind in the world.

BioCeuticals will be used to spearhead a push further into the growing practitioner market, which is where the company’s roots are; founder Maurice Blackmore himself set up the first practitioner brand, which then moved with the market trends more towards the consumer (i.e. over-the-counter) sector. “We have been very keen to get back to our roots in a credible way and buying BioCeuticals is a very important part of our strategy,” explains Ms Holgate. Until the deal, Blackmores only had “a couple of per cent share of that market,” so it has bought a business which is “very much aligned to us but serves a different customer base. There is very little overlap; we don’t compete on the shelves. There are tremendous cultural and philosophical synergies, yet we target two very different parts of the market.”

In terms of the nature of the products, there is considerable similarity in basic form, though it would be an over-simplification to say that the medicines available on practitioner recommendation are simply a more concentrated version of the consumer brands. Although the products are classified under the same regulatory framework as ‘pharmaceutical drugs’, Ms Holgate says she does not like the use of the word. “What we are about is health and wellness, which is what a lot of natural medicine is all about.”

The combined talents of the two companies – including some 200 qualified healthcare practitioners – offer a means of better understanding the needs and wishes of the consumer, says Ms Holgate. “We are fuelling this business for growth in this market.” Practitioners, she says, are generally very supportive of the acquisition because of the reputation the Blackmores name carries for high quality and efficacy. Their only concern, she adds, is whether the two businesses might be simply mashed together. “We are not going to do that. We did a lot of work with practitioners prior to acquiring the company.”

With its new access to more capital and more resources – as well as to a greater knowledge base – the BioCeuticals arm will have considerable scope for expansion – initially within its Australian home market. In the medium term, Blackmores also has several hundred staff in seven Asian countries so there are some strong opportunities for the practitioner ranges in export markets as well.

This is not as simple as it may sound, because every Asian country has its own separate regulatory framework. In many cases, this is largely obstructive and designed to protect local industry. Products must pass Australian standards which are as stringent as anywhere in the world, but – as in many other consumer and industrial sectors – some governments still choose to refuse to recognise them and require certification to a local standard instead, an intensive process.

A related issue is halal certification. Certain ingredients are forbidden for observant Muslims. Blackmores recently made the necessary adjustments to gain certification for many of its products, but gaining approval is “a very thorough and complex business. It means not only your operation being certified but your ingredient sources and your manufacturing partners.” That goes for every single country, so while the process may be simplified after initial compliance, it does not mean the Blackmores products are automatically cleared for sale in the Middle East, for example.

Ms Holgate says she is looking at the potential of that market but, “in the first instance I would like [halal certification] to be extended to Australia. We have a growing multi-faith population here, and there are many customers who would really appreciate and respect Blackmores’ guarantee of halal certification.” Entering the Middle Eastern market would certainly be a good step, she adds, but is not a top priority in the short term. “We have a lot of other things going on to keep us focused. I have quite a lot on my plate at the moment. But in the medium term, the Middle East is a possible opportunity.”

Yes, the strong Aussie dollar is a negative for an exporting business, she believes, especially when you factor in the increased cost of import duties and the ‘double whammy’ of lost value when the export earnings are returned to dollars. “But relatively, at 23 per cent growth year-on-year for Asia, I think we are doing pretty well.”

The startling success of alternative medicine over the last couple of decades has certainly played a part in the company’s success, and is seeing no signs of slowing down. “It is still growing at around six per cent – and that is in a challenged retailing market with a lot of price competition,” Ms Holgate explains.

A key factor is simply that we are all getting older. “One million people turned 50 this year,” and they – together with the rest of Australia’s ageing population – want to stay fit and flexible. “Our products are about prolonging one’s agility and health pattern.”

Ms Holgate says that China represents an exciting market as well. In fact, it is becoming clear that there is an aspirational aspect to consumer trends in vitamins – as much as in iPhones or Ferraris – and evidence is building that consumers are quite prepared to cast aside reliance on extracts of deer or tiger if they can afford more ethical alternatives. “Asian people view very favourably western natural medicine, which is seen as being very high quality. They are very family-oriented and want to give their family the best gift of health, so they often see natural medicine as being the best way of assuring that.” In general, she says, the Chinese and western models work very well together.

Extending the family metaphor, Ms Holgate reminds us that Blackmores has a distinctly family history. Founder Maurice’s son Marcus is the current chairman, and BioCeuticals was founded by Michael Hall (with his two sons) who studied under Maurice. “We come from the roots of the same tree and we want to work with practitioners, really develop a business they can be proud of, and service their needs.”

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June 21, 2018, 1:15 AM AEST